Occupational Pensions: Submission by Federal Labour Court to the European Court of Justice regarding compensation for benefit reductions by the Pension Insurance Association

By order of 20 February 2018 (3 AZR 142/16 (A)), the Federal Labour Court asked the European Court of Justice for a preliminary ruling on the interpretation and direct application of Article 8 of Directive 2008/94/EC. According to that provision, Member States are required to ensure that the necessary measures are made to safeguard the interests of employees regarding pension entitlements in case of insolvency of the employer.

The plaintiff receives benefits from a company pension insurance fund (Pensionskasse) which were reduced by the company pension insurance fund due to economic difficulties. In the past, the plaintiff’s former employer compensated for these benefit reductions on the basis of its statutory liability. After the employer became insolvent, the plaintiff demanded that the Pension Insurance Association (PSV), as a provider of statutory insolvency insurance, should pay for the company pension insurance fund’s benefit cuts. The Regional Labour Court dismissed the claim. The State Labor Court granted it.

The Federal Labour Court submitted the case to the European Court of Justice.

The Federal Labour Court assumes that national law does not require the Pension Insurance Association to compensate for benefit reductions, if the benefits are provided by a company pension insurance fund. According to the Court, liability of the Pension Insurance Association can therefore at most arise from Article 8 of the Directive. This presupposes that the provision also applies to cases in which – as in this case – an employer cannot compensate for the benefit reductions of a company pension insurance fund due to its own insolvency. In addition, according to the Court’s view it is relevant under which conditions pursuant to Article 8 of the Directive a state insolvency protection is guaranteed. It also depends on whether the Directive has direct effect and whether the employee can therefore refer to the provision as against the Pension Insurance Association. The European Court of Justice is responsible for answering all these questions.